World Bank to Ease Malawi of 43 percent

Agence France Presse
November 14, 2000

Malawi will benefit from debt forgiveness covering 43 percent of its 2.5 billion dollars in foreign debt, a senior World Bank official announced after talks with President Bakili Muluzi. Darius Mans, the World Bank country director for Angola, Malawi and Zimbabwe, on Monday said that the relief measure followed Malawis submission of its poverty reduction strategy to international financial institutions.

Mans was addressing reporters in the northern town of Mzuzu after meeting Muluzi, who on November 5 sacked three government ministers, opening the way for a corruption probe against them. The southern African country has been undergoing tough economic reforms sponsored by the World Bank and the International Monetary Fund (IMF). A World Bank official in the administrative capital Lilongwe on Tuesday told AFP that a decision for debt forgiveness under the highly indebted poor countries (HIPC) initiative had already been reached. Final approval will be made by the banks executive board when it meets on December 21, the official said.

Malawi applied for debt relief under the HIPC initiative in May. About 60 percent of 11 million Malawians live below the poverty line. Under the HIPC scheme, the World Bank and the IMF require that savings from the scheme are ploughed into social services and poverty reduction programmes, to ensure economic growth benefits the poor. Mans said the World Bank and Malawi had also worked out a new 55 million dollar loan package to be released in December for balance of payments support. Finance Minister Mathews Chikaonda said Malawi, faced with low foreign exchange reserves, will receive 25 million pounds (36 million dollars) from Britain for balance of payments support.

Mans early this year said, Malawis problems concerned how to spur economic growth, which has stagnated at two percent over the last decade. Donors in May pledged Malawi 1.1 billion dollars in external assistance over 2000-2002 aimed at meeting a growth target of about six percent. The World Bank says Malawis economy needs to grow by six percent annually. Chikaonda forecast a steady rise in economic growth of up to six percent in 2002, from 4.5 percent this year.

Depreciation of the Malawi kwacha, now trading at 80 to one dollar, high interest rates and low receipts of foreign exchange from tobacco, the top earner, have hurt Malawis economy this year. Malawi earned 165 million dollars from tobacco this year, a 14 percent drop from 187 million dollars in 1999. Malawis tobacco income has been affected by the weakest prices on record at the auction floors, coupled with the success of anti-smoking campaigns around the world.

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